Thank you, Cathy. Good morning and welcome to the Builders FirstSource second quarter earnings conference call. With me today are Chad Crow, Chief Executive Officer; and Peter Jackson, Chief Financial Officer. A copy of the slide presentation referenced on this call is available on the Investor Relations section of the Builders FirstSource website at bldr.com.

Before we begin, let me note that during the course of this conference call, we may make statements concerning the company's future prospects, financial results, business strategies and industry trends. Such statements are considered forward-looking statements under the Private Securities Litigation Reform Act of 1995 and is subject to certain risks and uncertainties, which could cause actual results to differ materially from expectation.

Please refer to our most recent Form 10-K filed with the Securities and Exchange Commission and other reports filed with the SEC for more information on those risks. The company undertakes no obligation to publicly update or revise any forward-looking statements. The company will discuss adjusted results on this call. We have provided reconciliations of non-GAAP financial measures to their GAAP equivalents in our earnings press release and detailed explanations of non-GAAP financial measures in our Form 8-K filed yesterday, both of which are available on our website.

Thank you, Binit. Good morning and thank you for joining us. I will start on Slide 3. I'm very pleased to share with you another outstanding quarter of execution and results delivered by the 15,000 team members of Builders FirstSource.

During the second quarter of 2019, we made significant progress in the execution of our strategic plan and again, delivered above-market growth, expanded margins and exceptional free cash flow generation. We continued our strategic investments in market-leading, value-added products and solutions while realizing the growth, margin and customer value benefits from these investments made over the last several years.

Our operational excellence initiatives also continue to gain momentum and are delivering measurable results. And of course, our strong cash flow and working capital management continue to underpin our investments while at the same time enabling the reduction of our ratio of net financial debt to adjusted EBITDA to 2.7x at the end of the quarter.

Our second quarter results and performance built on a strong start to 2019, providing momentum as we enter the strength of the selling season. In the first half of 2019, we grew our estimated sales volume, excluding commodity deflation, by more than 4%, well above overall housing starts, which actually declined during the period.

In the first 6 months of the year, net sales declined by 7% as sales volume growth was offset by commodity price deflation of more than 10%. Consistent with our strategic plan, value-added products led the growth, increasing in estimated sales volume by 7% in the first half as we continue to realize the benefits of our investments.

During the first half, we completed the rollout of our delivery optimization system to approximately 200 locations, measurably improving the speed, up time and reliability of our distribution network and continue to realize the benefits of our pricing tool implementation as well.

We continue to expect a benefit between $14 million and $16 million to our EBITDA in 2019 from these initiatives. As our customers continue to face increased labor cost and scarcity, they increasingly look to partner with us for solutions. Our market-leading manufacturing and value-added capacity and capabilities have positioned us well to meet this growing opportunity.

In July of 2019, we purchased 3 manufacturing facilities in Arizona and Nevada, expanding our presence to 40 states and 77 of the top 100 MSAs. During the balance of 2019, we also plan to add 3 new truss plants, approximately 8 new truss lines in existing plants as well as door facility expansions and new machinery and a dozen more of our value-added operations.

Our industry-leading production capacity, sales force and distribution network are key to our competitive advantage, and we will continue to invest in extending our leading position. Later in the call, I will talk more about the competitive advantage that we are further leveraging through the combination of our national scale, local management focus and network market density.

I'll now turn the call over to Peter, who will review our second quarter results in more detail.

Thank you, Chad. Good morning, everyone. As a reminder, we have included adjusted figures to normalize for onetime costs related to our integration work and other nonrecurring items. We had $1.9 billion in net sales in the second quarter, down 8.9% due to commodity deflation, which decreased sales by 11.3%.

The commodity headwind offset estimated sales volume growth of 2.4%, well above the overall U.S. starts market. Our value-added product categories again led the way with a 5% increase over Q2 of 2018, reflecting the execution of our strategic plan. Gross margin of $517.2 million increased by $21 million or 4.2% over the prior year.

Sequential gross margin percentage remained at a high level, increased slightly to 27.2% and an exceptionally strong improvement of 350 basis points over the second quarter of 2018. The margin percentage increase was attributable to an improved product mix, the decline in the cost of commodities relative to our customer pricing commitments and our teams continued focus on pricing discipline. Commodity prices moved lower during the quarter, framing lumber and sheet goods prices decline by approximately 10% to 6%, respectively, compared to the beginning of the second quarter.

In addition, our team again demonstrated its ability to manage through commodity price volatility and at the same time maintain a focus on delivering value-added solutions to our customers. The result is a favorable sales mix towards higher-margin products and another strong quarterly gross margin.

Our SG&A as a percentage of sales increased by 240 basis points on a year-over-year basis. Similar to the first quarter of 2019, the largest component was the impact of deflation on sales. On the spending side, variable compensation was higher due to higher commission expenditures.

As we've mentioned in prior quarters, we pay higher incentives for higher-margin sales. Accordingly, our outsized gross margin percentage led to higher commission expenditures in the quarter. Interest expense for the quarter was $29.4 million compared to $29 million in the prior year, an increase of $400,000. The increase was due to $4.3 million in charges related to debt financing transactions during the quarter.

Excluding these onetime charges, adjusted interest expense decreased by $3.9 million, largely due to lower outstanding debt levels compared to a year ago. During the quarter, we issued $400 million in notes that mature in 2027, the net proceeds were used to repay $300 million of our term loan and to purchase $97 million in 2024 notes. This refinancing further demonstrates our commitment to prudently manage our balance sheet by layering in attractive long-term fixed rate debt.

Adjusted net income for the quarter was $113.9 million or $0.98 per diluted share compared to $90.2 million or $0.77 per diluted share in the second quarter of 2018. The year-over-year increase of $23.7 million or 26.3% was primarily driven by the improved operating results combined with lower interest expense. Second quarter EBITDA grew by $24.7 million or 7% to $246.5 million. The improvement was primarily driven by the aforementioned growth in gross margin dollars.

Turning to Slide 5. The strength of our business, including our national scale demonstrated itself again in the second quarter. Housing starts remained soft and commodity prices continue to decline. Our team managed growth in 4 of 5 noncommodity-related product categories. And excluding deflation, even our lumber and lumber sheet goods product category achieved positive estimated sales volume growth.

As we build further upon this success, we are committed to continuing the expansion of our network of manufacturing facilities strategically located across the country. As Chad mentioned, we are pleased to have added 3 additional truss manufacturing facilities after the quarter ended, bringing our total to 61. Approximately 25% of our total 2019 capital expenditures will be invested in our value-added growth initiatives and expansion of our production capacity.

Turning to Page 6. Our second quarter sales volume grew by an estimated 2.4% in the single-family new construction end market compared to an overall decline of 6% in overall U.S. single-family starts. Regional strength particularly in parts of the East, contributed to the outperformance. Our sales volume in R&R and other end markets declined by 2.2% as weak activity in the agricultural sector continued in the Midwest related to the ongoing trade dispute with China. Multi-family sales volume improved by 3.2% largely due to the timing of projects started in 2018.

Turning to Page 7. Although our business typically uses cash in the first half of the year and generates cash in the second half due to seasonal working capital needs, the company generated cash in operations and investment of $138 million in the first half of 2019.

The improvement is largely due to the effects of continued commodity deflation on the value of working capital compared to the prior year period. Total liquidity as of June 30, 2019, was an ample $755.3 million, comprised of borrowing availability under our revolving credit facility and cash on hand. Our net-debt-to-adjusted EBITDA ratio on a trailing 12-month basis as of June 30, 2019, was 2.7x, a 1.8x reduction from the prior year and near the lower end of our target range of 2.5x to 3.5x.

Looking forward to the second half of 2019. We remain confident in our team's ability to execute on market opportunities, mitigate challenges and deliver the initiatives within our control. We provide some details on the third quarter and full year 2019.

Net sales are expected to be down 11% to 14% in the third quarter driven by a commodity price deflation impact in the range of 14% to 17%. Gross margin percentage is expected to remain relatively steady sequentially from the second quarter of 2019. As a result, third quarter EBITDA is expected to be between $140 million and $150 million.

For the full year 2019, we expect our single-family sales volume to grow in the range of 3% to 6%, R&R market growth in the low single digits and flat to low single-digit growth in the multi-family market. At this point, we anticipate full year commodity deflation similar to the 10% to 13% we saw in the second quarter.

From a gross margin perspective, we expect gross margins to normalize above 26% in the fourth quarter. We also remain confident in our operational excellence initiatives, which we expect to contribute $14 million to $16 million for the full year of 2019 in EBITDA.

Overall, we expect EBITDA to be in the $475 million to $490 million range for the full year of 2019. We expect an effective tax rate of approximately 25% for the balance of 2019. Capital expenditures are expected to total approximately 1.5% of full-year sale. And regarding cash taxes, we expect to fully utilize our federal NOL tax assets and credits to become the federal cash taxpayer again in the fourth quarter of the year.

Cash interest and cash interest expense are both expected to be in the range of $100 million to $105 million. As we continue our systems integration work, we expect onetime costs related to that of approximately $15 million to $20 million for the year. We now expect to generate $180 million to $210 million in free cash flow for the full year 2019 after funding our capital expenditure plans of approximately 1.5% of net sales and our recent acquisition in the amount of $43 million. I would highlight that the new guidance is actually an increase relative to the first quarter free cash flow guidance.

Now Chad will provide an update regarding our strategic priorities and outlook.

Thank you, Peter. Moving to Slide 8. I'd like to build up on some of the last points that Peter just shared about our strengths from a financial perspective and dive a bit into some of the day-to-day operational underpinnings of our advantages and execution as well.

If you have been listening to our prior calls, you know we are very proud of the growth platform that we have built and often speak about our national scale and industry-leading footprint. The acquisition of ProBuild in 2015 enabled us to create the largest professional supplier in the space, leading to more than 400 locations across 40 states and an unmatched depth and breadth of resources.

Our manufacturing and distribution capabilities are coast to coast and while not in every MSA, our presence in 77 of the top 100 provides a highly attractive geographic balance and a solid foundation for growth.

Today, I would like to take a moment to highlight how we also go about building highly efficient and effective local market networks to create competitive strength and deliver a truly differentiated customer value proposition. First, within each of our local and regional markets, we are intensely focused on local customer relationships, connectivity, demands and dynamics, all of which differ from market to market.

Within each market, we seek to build a regional density of operational capabilities to support exceptionally strong trust and reliability. In addition, we developed a high-caliber distribution competency and exceed our customers' expectations with deep and talented management. We have found that our run-it-like-you-own-it culture empowers local management to deliver high levels of service and responsiveness. This leads to relationships often spanning decades built on trust that positions our team members as extensions of our customer's teams. Our designers are able to closely partner in the build process and become a trusted adviser on specific products and services that best suit each job.

Equally important, however, is how we created a density of operations in key markets. Take the Atlanta metro area, for example, where we view and manage inventory across a network of locations in order to service customers quickly, efficiently and reliably from multiple delivery points within the market.

By combining our knowledge of local home builder needs and activity across an optimized network, we benefit from cost and asset efficiency and become the supplier of choice to our customers. Our teams generate and share local market intelligence by utilizing in-depth analysis across locations, customers and projects to ensure that products are shipped from the optimal location.

Dedicated specialists move products between locations to minimize working capital, eliminate redundant inventory and rapidly restock while ensuring that customer needs are reliably met with efficiency and precision.

We have also aligned our compensation structure to incentivize local managers to work together across shipping lines and locations, ensuring seamless coordination and execution. The result is that we have the right products at the right place and consistently do what is best for our customer. Our on-time delivery rate is over 90% across the Atlanta market and is just one example of better customer service at a lower cost to serve while delivering financial performance to our shareholders.

This aspect of our competitive advantage is difficult for smaller competitors to achieve as it lies in the powerful combination of balance of our national scale with intense local management and regional network density.

Moving to Page 9. Although U.S. housing starts have shown year-over-year softness over the last few quarters, the fundamentals of homebuyer demand remain intact. And we have seen increasing signs of stabilizing buyer activity as the second quarter progressed. It is important to note that we have been able to demonstrate the particular strength of our strategy, team and platform during this period of fluctuating demand.

Our national footprint, unmatched scale and manufacturing capability and exceptional sales force provides us with a platform well positioned to capitalize on the ongoing opportunities for core growth in the coming quarters and years. Together with our ongoing investments and operational excellence and value-added capabilities, these strategic advantages continue to give me confidence that we will achieve our goals.

Our target framework begins with capturing an incremental $130 million to $160 million in EBITDA as compared to the full year 2018 from what we call, core business growth as housing starts return to historical averages. In addition to this core growth, our plans continue to call for investing in approximately 20 new value-added product facilities, including 3 additions this year plus the 3 that we recently acquired. We are seeing significant ongoing opportunities to increase our market share and increase the penetration of our higher-margin products as our customers also accelerate their adoption of these labor-saving, high-efficiency products.

As I mentioned earlier in the call, our value-creation plan also includes a set of operational excellence initiatives already well underway, including investments in distribution and logistics software, pricing and margin management tools, back-office process efficiencies and information system enhancements. When fully rolled out across our roughly 400 locations, these initiatives in operational excellence and value-added products are designed to deliver cost benefits and margin expansion, which total $90 million to $110 million in incremental EBITDA, and they will further differentiate our service levels and strengthen our connectivity and overall value proposition with our customers.

Our overall plan remains on track to generate EBITDA 50% higher than last year or roughly $750 million as we reach historic norms in housing. We expect to deliver EPS between $3 and $3.50 and achieve greater than 85% conversion of our adjusted net income to free cash flow. The substantial cash we generate will be used to fund both our high return growth investments and to further improve our financial flexibility.

Moving to Slide 10. Housing market fundamentals and demand drivers remain fundamentally supportive as we enter the prime selling season. As homebuilders have continued their pivot towards home formats and price points that are increasingly in demand by homebuyers in the market, we have seen stabilizing sentiment and activity and we are more confident than ever that our network scale, market diversity and value-added product leadership provides us with distinctive competitive advantages and a long runway of growth opportunities.

Despite the anticipation of ongoing commodity deflation headwinds, I remain confident that our consistent strategic investments and execution by our talented and motivated team will continue to deliver strong results as we build an efficient and agile organization and implement our operational excellence programs.

As always, I would like to thank our 15,000 team members across the country for their hard work and delivery of excellent service to our customers as we drive value creation in the quarters and years ahead.

Congrats on the quarter. So the truss plants that you guys acquired in July obviously, at the same time, you guys are investing in your own plants and the new greenfields. Can you think -- or help us think about how you're going to balance that going forward? Perhaps what you're looking for in a given market where you might choose the M&A route instead of a greenfield. And is this something that we should expect to see more of?

Yes. We've said on prior calls, I looked at a lot of these opportunities as a build versus buy decision. And at the right multiple, it makes more sense in my mind to go the M&A route. It gets you into the market quicker plus you're not adding capacity into a market, which can be difficult and create some real pricing war. So it will be a balanced approach, though. Like I said, we are going to be pretty picky and it's got to make sense from a financial perspective and from a multiple perspective. But I like the fact that we have the flexibility to do either now. And now that we've gotten our leverage ratio down, we can make those decisions and be a little more opportunistic when it comes to growing the value-add part of our business.

Got it. Okay. And then secondly, the -- you guys again reported a pretty significant outgrowth in your single-family volumes relative to the single-family housing starts. I would just be curious if you guys have any finer points on that. Just how do you think you're actually comparing versus your own markets? You could look at different data points, the completions data probably held up a little better in Q2. So what do you guys kind of see as a sustainable share gain at this point, as the market recovers and what kind of metrics are you looking at to kind of determine your market outperformance?

So I'll let Chad comment more broadly. But specifically to some of the details, I think we do see share gain for the business. We mentioned that there were some particular strength on the East Coast. I think we were also advantaged a bit by some of the markets that were most negatively impacted with starts being areas where we don't play a ton of, big chunks in California, for example. But even in the markets where there has been some decay, we have still seen some share growth, and I think that Chad hit on a couple of the points as to why. I think we are a reliable provider, we are a trusted partner for our homebuilder customers and we performed well. But more broadly, I would say that the east of the Mississippi for us this year has definitely been a strength where we've seen the biggest share gains and the biggest successes.

Yes, and I think a lot of it goes back to the multiyear investments in value-add and component manufacturing. I'm still a -- I'm a firm believer that, that is not going to go away. The labor shortage is not going to go away. The cost of labor is not going to go away. And I think it's a trend that will continue, and that's why we were focused on developing that part of our business. And that's where we've seen some definite outgrowth when it comes to our volume for starts.

Great quarter. I want to first touch on the gross margin and wondering if you could just put in buckets of the year-over-year improvement of -- try and dimensionalize new improvement in mix, the decline from lumber cost relative to pricing and then your price discipline that you highlighted.

Sure. Yes, as you can imagine, we spent a lot of time making sure we understand that. From our analysis, we would say more than 50% of it is a direct result of both the decline in commodities and the -- in the period as well as compared to prior year. So there's sort of 2 components. One is, last year this time, we were seeing pretty significant headwinds obviously from the rapid inflation. So with that normalizing, there's clearly a normal tailwind there. In addition, as you pointed out, there was a modest decline during the quarter in the value of commodities. So those components together leading to a little more than half of the total change. Probably about 20% to 30% of the remainder of the total change is attributable to mix and that goes to the investments that we have made in the sort of continued growth and outperformance of the value-add portion of the business. And the balance is really across the rest of the business but with the focus on the work that we have done in operational excellence. So pricing discipline, special order margins, those areas of the business where we feel like we can refine our ability to manage price effectively is the balance.

Okay. And then I want to go back to a -- something in your guidance that you said. You said that gross margin to normalize above 26% in fourth q. I wanted to understand what do you mean by normalize? You're talking about in 4Q itself or are you talking about more of a longer-term run rate you think you're going to stay above at that 26% level?

Yes to both of those. So what we've talked about in the past, people have frequently asked us, "But what is normal? You guys talk about gross margin impacts due to commodity fluctuations but what's normal?" At our current mix, based on the current prices, which is an important part of the equation always, but we think it's above 26%. We were a little cautious as we've gone throughout the year to snap that line because we wanted to see where things have settled. But as we work through the year, we think that's a good guide for everyone. Based on current commodity prices, it's not 25% as normal in the fourth quarter. And going forward, we think normal is over 26%.

Nice job in navigating a lot of cross turns right now. My first question, I just wanted to get a little more detail on the acquisitions if we could. Can you give us a sense for from a revenue and EBITDA or margin standpoint, how we should think about contribution both for the second half and on a run rate basis?

It's pretty modest acquisition. I'm not sure that you're going to be able to cipher it out of the details. Truss facilities are -- we've talked quite a bit about what a -- an incremental value would be provided by a truss facility. And that whole question about how we allocate capital, we feel pretty good about our ability to balance between debt pay down, stock repurchases and M&A. But I think it's fair to say that we're only buying when we think we're getting a good deal, when we think it's a deal that makes sense for us, and that $43 million represents a relatively modest investment for the 3 plants that are already up and running in the market where we haven't played before.

Yes, and then I liked the fact that it gets us into a couple of new MSAs and if we so choose to expand the product offering in those MSAs. We do have facilities already north of Phoenix, and so we now have the opportunity to serve the customers up there as well with truss and panel.

Okay. I guess quickly on that then, should we think about these as being similar in nature whether it's size or otherwise to your existing plants? Or is there anything different about these plants that we should be aware of?

Okay. My second question is around sticking with the theme on manufactured products. Obviously, the markets had some headwinds in terms of starts and your volume has continued to well outpace that. But it has decelerated over the past quarter. And so I want to get a sense of just when you think about that 6% on manufactured products volume, you're putting in a lot of investment organically you've bolted on with these couple of plants. How are you thinking about within your guidance potential for reacceleration? Or just what level of growth in volumes should we be thinking about for manufactured products going forward?

Yes, that's a tough forecast. I mean obviously you're going to have a correlation with starts. We've talked about that single-family starts over the long-term are the best indicator of our underlying demand. We do think we're taking shares, so obviously that's another component and this is part of our ability to do that because we think the macro trend is coming towards Builders FirstSource as it pertains to our ability to invest in our skill set in that truss manufacturing. Or I would say that to maybe the best answer to your question, we're going to continue to invest in this space because we believe that the growth there is always going to be better than starts. It's kind of tough to correlate, but I think that's the summary.

Well, it's unfortunately a trend we've been talking about for a few quarters since it's largely where we do most of our R&R is in the upper Midwest, which is still being hit from the tariff issues; Alaska, which is still struggling with the lower oil prices; and then to a lesser degree, on the West Coast, is our 3 pockets of R&R. And really the hardest hit has been the upper Midwest for us.

So the -- back to the value add. Can you give us an idea of where you see that going, say, next year, next 3 years, next 5 years? I'm going back to the comment you made when asked about gross margin. You said normalizing above 26% at the current mix I assume the goal is not to keep the current mix. So what I'm trying to get at is where do you see the mix going over time? And where do you see the margin going over time as a result of that mix shift?

Yes, it does move. And I think we can kind of talk about the fact that since the merger when we were about 36% value add, we're up over 40% value add. So there's clearly a trajectory there that the footprint and the investment in capacity has enabled us to track with broader industry transition towards that type of off-site manufacturing. So we feel good about it. Pretty tough to predict in any given period what the growth rate is going to be and what the impact on mix is. And candidly, it is almost impossible if you want me to forecast commodities because the problem with that 26% and with the value-add percentage is that it's dependent on the value of commodities because it will change our relative mix just from a dollar perspective.

So it's a little tough to extrapolate. I mean I would say, if you're talking 0.25% to 0.5% point of growth on an ongoing basis assuming that things continue to trajectory, that's probably a reasonable basis. Unfortunately, it assumes a stable commodity prices, which I wouldn't be foolish enough to promise you.

And you're right. So yes, I understand that. So 0.25% to 0.5% point of mix shift I assume is what you're saying, Peter, so is it still -- remind me that the gross margin delta that we should assume value add versus commodity.

Okay. Chad, I just had a question about the R&R environment. I think in the guidance, there was an assumption of a -- did I hear low to mid-single-digit growth for the year? As for being down in Q2, what's -- if I heard that right, what's -- what's got you comfortable that it's going to improve?

Well, after the tariff news yesterday, it may be a little tougher to get there. But we are seeing some strengthening in Alaska and the West Coast is holding in well. So I'm optimistic we can see an overall improvement there. But again, the real key is going to be the mood that -- on the tariff issue and how it's impacting the farmers in the upper Midwest.

Just a quick follow-up on that multi-family comment. You're not the first to talk about maybe working through a little bit of backlog in multifamily in the second quarter. So just curious where you see that backlog now? Will we see a bit of a payback in future quarters or do you feel like it's stabilized a little bit?

Great. And just a bigger picture question on some of your initiatives. You talked about specifically pricing and efficiency initiative. I'm just curious, in this kind of environment when you have really aggressive lumber price deflation, does that make the pricing initiatives more or less important as you're seeing such large deflation? And has the priority in those initiatives shifted at all in this current environment?

I would say, if anything, our focus on pricing has increased over the course of the year. The more we dig, the more I feel there's incremental opportunities there regardless of what commodities are doing. Clearly, commodities is the toughest, most competitive part of our business and it kind of is was it is. But 2/3 of our business is not commodity-related, and I still feel like there's really nice opportunities there no matter what we have to deal with, from a commodity inflation standpoint.

And just to recap some of that pricing work that we're doing is really focused on discipline in process, right? It's -- this isn't a -- out to gouge the customer type of dynamic. This is a how do we make sure we're updating our prices effectively. We're giving people good tools to use so that they understand the cost/benefit of the relationship with individual customers? It's just I would say fundamentals that we can get and have been getting better at. So it is very I would say long-term good practice that we think is going to help us regardless. It's a great project and a high priority.

We think it's pretty broad. Yes, I mean it's -- where -- our approach has been very market-oriented so market-by-market, and we see it across the board. I mean obviously, commodities by their very nature, is more competitive, but we see it everywhere.

Okay. And you've highlighted the East as kind of an area of strength, which is I believe where you offer more kind of turnkey framing services. There's a lot of talk about the products that you're offering builders to drive efficiencies. But how do you think about some of those services that kind of help you win share as well?

Well, I think services are a big part of it, installation services create customer stickiness, optimizing framing packages on the design side as a service. So any time you can add more services to your offering, you're just that much more of a partner with the homebuilder. And as I said a minute ago, a much more -- much stickier relationship, much less likely to price you to save a $0.05 on a 2x4. And so anything we can do to be that partner that the builder relies upon to help them build that house most efficiently whether it's products or services. It's something definitely we're focused on.

Chad, Peter, and team, congrats. I just wanted to get a sense. As we think about modeling longer term, you mentioned I believe that you're starting to see your backlog of orders or what you're looking at in incoming business settling out a little bit with homes that people want to buy. I take that as a code language for smaller homes. If I'm wrong on that, correct me. But my question is, as we think about -- we've always modeled units of single-family housing starts and obviously we could be looking at a smaller unit. Do you have enough data or input call on your near order book how we would think about a delta when we model revenue versus starts and units as we go out in time with what you're seeing?

Yes, so John, I wish I could tell you yes. The short answer is, I don't think we have a good rule of thumb for you. You've seen the census information like we have. We've done some analysis internally, but it doesn't give us a sense that you can really forecast or predict the impact on volumes due to the size of the homes. Obviously, it will have an impact, but we haven't seen a material change in volumes for what we sell yet as a result of.

Yes. I mean we've talked about -- if you want to use a point or 2 as a volume adjustment attributable to that, we don't think that's unreasonable. But it's tough to say that's the right number that we've got a lot of statistics for analytics to support that.

And I think the homes are a little smaller, but I also believe that the demand, the home buyers demanding these smaller homes still want nice homes. So they still want nice doors, nice windows. And so to a large degree, if you're just taking out a little bit of square footage, it could just mean a little bit smaller framing package but you're still getting some nice sales and margin on a lot of the other pieces of the home.

Okay. And you're having a nice year. You mentioned commissions influencing the SG&A. I'm just wondering on the compensation's number for corporate. Is that influencing the number in any way? You should have an increase in bonuses I assume. But how would that manifest itself in SG&A?

Yes, that's the other component. It's a little smaller than the commission's number but those are the 2 big numbers that have changed. Obviously, the performance this year, more broadly, has been good. We have a little bit of quicker accrual on the timing of the bonus, although I will say that some of the lapping that we'll do in the back half of the year will normalize that a bit.

Yes. Okay. And then lastly, you did a phenomenal job of deleveraging since the acquisition. And obviously, you've got a tailwind from the deflation of commodities. So is there some way, Peter, you think about where you're -- I'm not going to ask you, Chad, to project the lumber prices. But is there some way, using the word normalized, where your debt-to-EBITDA would be, if we hadn't had all of this deflation, I'm trying to get a sense of whether you feel for a normal lumber inflation rate, there might be a creep back up in that number where you are debt-to-EBITDA on a normal lumber price situation.

No question. We picked up a ton of tailwind this quarter as a result of the deflation in the past couple of quarters, right? I mean it's something that we sort of indicate more broadly when people ask us the long-term question about what would you do in the case of a downturn, right? This is a good example in a -- it maybe a false way because it's just value of commodities, but we generated a lot of cash when sales are down.

And yes, it's, say, the math we looked at a little less than a couple of $100 million that we would have had a tailwind on. This time of year, we're almost always increasing our leverage ratio. So for it to drop, is pretty remarkable and obviously 1.8 turns versus last year is indicative of that. As far as normal, I think we've been pretty committed to the idea of debt pay down and derisking but in that 2.5 to 3.5 range, we're not afraid. I would say to fall out of the bottom of that range if it means we're building dry powder if we can't find good deals but as we indicated -- as we took action on this year or this quarter, there are some good deals out there. And we will continue to snatch those up where we think it makes sense, and we're getting a good value for our money. I think we're in a bit of a sweet spot now. No question if the price of commodities runs back up, we will see growth in working capital as a result, and definitely...

If you think about investing $30 million this year towards the value-add business, does the newly acquired plants take some of the $30 million? Or do you add to that kind of that level of investment to increase the capacity and grow these new plants?

Well the investment of $43 million in the acquisition price of the 3 plants plus the $30 million that you're referring to is -- are sort of rough guide on how much are the incremental CapEx is going to be attributable to growth and value add? I'm not sure I followed what you're asking.

In those specific facilities, we'll assess, but I think that they are already in pretty good shape. They are already well automated from what we have seen, always looking for ways to improve them but not a significant source of incremental investment, no.

Great, okay. And then as you think about -- as we think about gaining share and kind of what that looks like on the ground, do you win that share because of value-add or better pricing or quicker delivery? And then do you win -- are you winning that from larger competitors or is it smaller competitors? And then I guess kind of another element to that is a slower market or one that wherein does it -- is it more conducive to gaining share?

I would say yes. Certainly the offering of the component side of the business helps us gain share and in many times if you can get that business, a lot of the other products go into the home will follow. I don't -- I think we're taking share from big and small competitors. It's definitely a market-by-market situation, but there's no doubt in my mind that enhancing our value-add proposition creates additional opportunities to grow share and as I talked about earlier, the customer stickiness. Barring a just -- dramatic fall in housing, I don't think small ebbs and flows in housing demand is going to impact that situation when it comes to the components and in our ability to take share.

And then the other question I had is we've had 2 public builders now announced that they're going to start potentially building more homes for these single-family for rent operators. And just wondering if this does catch fire and become a trend and the big builders are building even more houses than they are now. How do you guys feel about your capacity? Would you need to make some meaningful investments if we were to see the big guys take even more share than they already have? Or do you feel like you can flex up without a lot of expenditures?

I think as far as the structural capacity is there. We would probably have to bring on some additional shifts in some of the plants if it really took off. I wouldn't see a large CapEx-type investment, though, I think we've got the capacity and the structure there but labor, we have to get some more labor.

I got to be optimistic about something. The one other question maybe on value add and I mean certainly you can give this to me off-line. But what has been the historical growth rate in value-add products -- value-add volumes since the merger? Do you all have that handy?

It's -- yes, I don't have it handy. If -- an estimate off the top of my head, would say high single digits, maybe double or right at the double-digit lines, probably in there, 8% to 10%. You can go back and follow up. We can follow up.

So just a couple of housekeeping really. One is, let's say, the integration-related expenses you guys had in the quarter, I think it was $3 million. Is there anything there we should be thinking about kind of as we're modeling the next couple of quarters?

Not for this year. It's pretty stable, but we are looking as we have promised to finish our ERP conversions by the end of this year. So there'll be a pretty substantial reduction in that integration cost line coming into 2020. We'll likely shift a bit of that into operations because there's some interesting projects we've been looking at. But there's a pretty substantial portion of that, that will go away.

Got it. Okay. And then just a little bit of clarity and sorry, if you guys touched on this. I dropped off for just a second. But the 26% or north of 26% margin that you guys referred to, just to be clear, that's basically taking out any commodity impact either direction. That's just kind of the new normal, meaning no commodity impact. Is that...

Okay. And then kind of going into the 4Q guide that you gave. If I heard you right, you're looking for something north of 26% in the 4Q but that would -- I mean you're -- I think if my math is right, you're going to have a little bit of benefit still left from commodity deflation in 4Q. Is that right? Or is that going to be kind of behind us at that point?

It will be pretty well gone by that point. We're looking at sort of bringing down inventory at that point. It will be pretty well gone. We'll be looking at normal. The biggest impact in the fourth quarter that people will see is the lapping of last year's big deflation.

Okay. Got it. It makes sense. And then the -- given where your leverage is now and again, you may have touched on this, I'm sorry if you have. But given where your leverage is now and it's kind of within that target range, should we -- I know you've picked up a few plants and done some things like that, I know you've got plans for plant kind of greenfield-type stuff and expansions on your own. But should we expect you guys to start kind of ramping up on the M&A front? And just given the -- where we are in the cycle, which still seems very reasonable and your leverage here.

Yes, I said earlier I like the position we're in. We don't have to buy anybody. We can invest through just our normal CapEx. If we come across opportunities that are a good value, good multiples, we can be opportunistic. We can pay down debt. So I like the flexibility. I like the position we're in. Short answer, yes, we're going to keep looking to expand our value-add offering. But it's got to be an acquisition that makes sense and this one we just did obviously, we felt did make sense. But there could be some other smaller opportunities like that come our way.

Got it. Okay. And then lastly is kind of within the guidance, Peter, the SG&A, I know you guys have some bonuses and things like that, that you touched on. But it actually looks like the SG&A is if I'm backing into this right, it looks like a pretty reasonable SG&A level versus last year. Is that -- I mean almost flat to even maybe even down? Is that right? Is that the right way to look at the SG&A expense kind of in the back half?

I appreciate you pointing that out. That has been certainly a significant focus for the operation. You're absolutely right. With the exception of some incremental commissions and some incremental bonuses, the team has done a really, really good job of disciplined spent management particularly when you think about the challenges in the overall hiring market. The challenges in attracting and retaining top talent. It is really good job by the team. Obviously, that does look great because the sales line has moved on us but the SG&A dollar discipline has been quite exceptional by the team.

Yes, and we started out the year really focusing on it because we knew deflation was going to be a headwind. And so the guys were really focused on that. And then as we've already discussed, we're starting to see some of the operational excellence initiatives flow through largely on the warehouse and delivery side helping us manage those costs even better.

Yes, thank you, once again for joining our call today, and we certainly look forward to updating you on our -- for the progress of our initiatives in November. And if you have any follow-up questions in the meantime, please don't hesitate to reach out to Binit or Peter. Thank you.